Budget 2023 – A summary for Independent Professionals in Ireland

Earlier this week, the Minister for Finance, Pascal Donoghue, and Minister for Public Expenditure & Reform, Michael McGrath, have announced Budget 2023.

The Budget for 2023 has been built against the background of inflation and cost of living supports.
At first glance, it looks like a giveaway budget with a bit for everyone, the question is will it be enough to deal with inflation over next few months or will it add fuel to the fire? Pardon the pun!

Taxation receipts for the year to date have been strong, and we are currently running a surplus of €1billion in 2022, with a surplus of €6.2billion forecast for 2023.
It was widely anticipated that this would be a Budget with large spending, and it didn’t disappoint with an extra spend of €11billion.

We have highlighted below the most common changes that will be relevant to our clients and a summary of the main changes.

Employment and Business Supports:

• A new temporary Business Energy Support Scheme has been put in place to allow businesses to claim up to €10,000 per month in support.
• The small benefit exemption scheme has been increased to €1,000 per year, this can be made up of 2 vouchers. Directors and employees may avail of this.

Personal Tax:

• The retention of existing income tax rates (of 20% and 40%), however the Minister has indicated that a third rate of 30% tax may be introduced in 2024.
• Tax bands have increased by €3,200 to €40,000 for individuals, this is worth €680 annually to higher rate taxpayers.
• An increase in the Earned Income, Employee and Personal Credit from €1,650 to €1,725 was also announced. This is worth an extra €150 per annum for most workers.
• An increase in the home-carer tax credit from €1,600 to €1,700.
• USC rates remain the same, though the bands have changed slightly to allow for the increase in the Minimum wage to €11.30. The second band will move to €22,920.
• Rental Tax Credit of €500 to be introduced.

Corporation Tax:

• As a country we are over-reliant on Corporation Tax receipts, over €8billion in Corporation Tax could be “vulnerable to a shock”.
  No changes have been made to Corporation Tax, and as usual, it will be kicked down the road to maintain our 12.5% rate.

VAT:

• The main change to VAT is that the temporary reduced rate for hospitality will increase from 9% to 13.5% from the end of February 2023.
• VAT on newspapers and defibrillators have been reduced to 0%.

Social Welfare:

• All Social Welfare payments to increase by €12 per week.
• Once off double payment for Social Welfare before the end of year along with the usual double payment at Christmas.
• Double payment for Children's Allowance in November 2022.
• Fuel allowance eligibility has also been extended.

Other Relevant Notes:

• Bad news for the smoker as cigarettes will rise by 50 cents per pack. An average pack now costs €15.50.
• No increased duties on petrol or diesel as previous excise reductions to remain in place.
• No change to the price of a pint, and there is a 50-cent reduction on cider.
• Free schoolbooks for primary school children.
• Once off reduction of €1,000 in third level education fees. There will also be a permanent reduction to €2,500 for students whose parents earn less than 100k per annum.
• The help-to-buy scheme has been extended to 2024 from a housing perspective.

Conclusion:

Budget 2023 has been designed to put more money in our pocket in to assist in combatting the increased cost of living.
For the average Independent Professional Contractor, Budget 2023 is worth €830 in tax savings (more if married on single income, with children).
 
Further to this, if you avail of the increased Small Benefit Exemption Scheme, it could be a tax saving of another €250 after tax, and an additional €500 in tax credits for renters.
The proposed introduction of a new rate of tax (30% perhaps) will be interesting and will hopefully benefit the squeezed middle class.
Parents will also benefit with an extra payment for children's allowance and free schoolbooks for primary school children.

Overall, it is a huge budget spend into the economy, and as always, some will be content, and others will be unhappy.